572 Phil.

52
THIRD DIVISION
[ G.R. No. 136409, March 14, 2008 ]
SUBHASH C. PASRICHA and JOSEPHINE A. PASRICHA, Petitioners,
vs. DON LUIS DISON REALTY, INC., Respondent.

DECISION
NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the

G.R. No. 136409 March 14, 2008

SUBHASH C. PASRICHA and JOSEPHINE A. PASRICHA, Petitioners,

vs.
DON LUIS DISON REALTY, INC., Respondent.

DECISION

NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the
reversal of the Decision1 of the Court of Appeals (CA) dated May 26, 1998 and its
Resolution2 dated December 10, 1998 in CA-G.R. SP No. 37739 dismissing the petition filed by
petitioners Josephine and Subhash Pasricha.

The facts of the case, as culled from the records, are as follows:

Respondent Don Luis Dison Realty, Inc. and petitioners executed two Contracts of
Lease3 whereby the former, as lessor, agreed to lease to the latter Units 22, 24, 32, 33, 34, 35,
36, 37 and 38 of the San Luis Building, located at 1006 M.Y. Orosa cor. T.M. Kalaw Streets,
Ermita, Manila. Petitioners, in turn, agreed to pay monthly rentals, as follows:

For Rooms 32/35:

From March 1, 1991 to August 31, 1991 – ₱5,000.00/₱10,000.00

From September 1, 1991 to February 29, 1992 – ₱5,500.00/₱11,000.00

From March 1, 1992 to February 28, 1993 – ₱6,050.00/₱12,100.00

From March 1, 1993 to February 28, 1994 – ₱6,655.00/₱13,310.00

From March 1, 1994 to February 28, 1995 – ₱7,320.50/₱14,641.00

 From March 1, 1995 to February 28, 1996 – ₱8,052.55/₱16,105.10

From March 1, 1996 to February 29, 1997 – ₱8,857.81/₱17,715.61

From March 1, 1997 to February 28, 1998 – ₱9,743.59/₱19,487.17

From March 1, 1998 to February 28, 1999 – ₱10,717.95/₱21,435.89

From March 1, 1999 to February 28, 2000 – ₱11,789.75/₱23,579.48 4

For Rooms 22 and 24:

Effective July 1, 1992 – ₱10,000.00 with an increment of 10% every two years. 5

For Rooms 33 and 34:

Effective April 1, 1992 – ₱5,000.00 with an increment of 10% every two years. 6

For Rooms 36, 37 and 38:

Effective when tenants vacate said premises – ₱10,000.00 with an increment of 10% every two
years.7

Petitioners were, likewise, required to pay for the cost of electric consumption, water bills and
the use of telephone cables.8

The lease of Rooms 36, 37 and 38 did not materialize leaving only Rooms 22, 24, 32, 33, 34 and
35 as subjects of the lease contracts.9 While the contracts were in effect, petitioners dealt with
Francis Pacheco (Pacheco), then General Manager of private respondent. Thereafter, Pacheco
was replaced by Roswinda Bautista (Ms. Bautista).10 Petitioners religiously paid the monthly
rentals until May 1992.11 After that, however, despite repeated demands, petitioners
continuously refused to pay the stipulated rent. Consequently, respondent was constrained to
refer the matter to its lawyer who, in turn, made a final demand on petitioners for the payment
of the accrued rentals amounting to ₱916,585.58.12 Because petitioners still refused to comply,
a complaint for ejectment was filed by private respondent through its representative, Ms.
Bautista, before the Metropolitan Trial Court (MeTC) of Manila.13 The case was raffled to Branch
XIX and was docketed as Civil Case No. 143058-CV.

Petitioners admitted their failure to pay the stipulated rent for the leased premises starting July
until November 1992, but claimed that such refusal was justified because of the internal
squabble in respondent company as to the person authorized to receive payment. 14 To further
justify their non-payment of rent, petitioners alleged that they were prevented from using the
units (rooms) subject matter of the lease contract, except Room 35. Petitioners eventually paid
their monthly rent for December 1992 in the amount of ₱30,000.00, and claimed that
respondent waived its right to collect the rents for the months of July to November 1992 since
petitioners were prevented from using Rooms 22, 24, 32, 33, and 34. 15 However, they again
withheld payment of rents starting January 1993 because of respondent’s refusal to turn over
Rooms 36, 37 and 38.16 To show good faith and willingness to pay the rents, petitioners alleged
that they prepared the check vouchers for their monthly rentals from January 1993 to January
1994.17 Petitioners further averred in their Amended Answer18 that the complaint for ejectment
was prematurely filed, as the controversy was not referred to the barangay for conciliation.

For failure of the parties to reach an amicable settlement, the pre-trial conference was
terminated. Thereafter, they submitted their respective position papers.

On November 24, 1994, the MeTC rendered a Decision dismissing the complaint for
ejectment.19 It considered petitioners’ non-payment of rentals as unjustified. The court held
that mere willingness to pay the rent did not amount to payment of the obligation; petitioners
should have deposited their payment in the name of respondent company. On the matter of
possession of the subject premises, the court did not give credence to petitioners’ claim that
private respondent failed to turn over possession of the premises. The court, however,
dismissed the complaint because of Ms. Bautista’s alleged lack of authority to sue on behalf of
the corporation.

Deciding the case on appeal, the Regional Trial Court (RTC) of Manila, Branch 1, in Civil Case No.
94-72515, reversed and set aside the MeTC Decision in this wise:

WHEREFORE, the appealed decision is hereby reversed and set aside and another one is
rendered ordering defendants-appellees and all persons claiming rights under them, as follows:

(1) to vacate the leased premised (sic) and restore possession thereof to plaintiff-
appellant;

(2) to pay plaintiff-appellant the sum of ₱967,915.80 representing the accrued rents in
arrears as of November 1993, and the rents on the leased premises for the succeeding
months in the amounts stated in paragraph 5 of the complaint until fully paid; and

(3) to pay an additional sum equivalent to 25% of the rent accounts as and for attorney’s
fees plus the costs of this suit.

SO ORDERED.20

The court adopted the MeTC’s finding on petitioners’ unjustified refusal to pay the rent, which
is a valid ground for ejectment. It, however, faulted the MeTC in dismissing the case on the
ground of lack of capacity to sue. Instead, it upheld Ms. Bautista’s authority to represent
respondent notwithstanding the absence of a board resolution to that effect, since her
authority was implied from her power as a general manager/treasurer of the company. 21
Aggrieved, petitioners elevated the matter to the Court of Appeals in a petition for review on
certiorari.22 On March 18, 1998, petitioners filed an Omnibus Motion23 to cite Ms. Bautista for
contempt; to strike down the MeTC and RTC Decisions as legal nullities; and to conduct
hearings and ocular inspections or delegate the reception of evidence. Without resolving the
aforesaid motion, on May 26, 1998, the CA affirmed24 the RTC Decision but deleted the award
of attorney’s fees.25

Petitioners moved for the reconsideration of the aforesaid decision.26 Thereafter, they filed
several motions asking the Honorable Justice Ruben T. Reyes to inhibit from further proceeding
with the case allegedly because of his close association with Ms. Bautista’s uncle-in-law. 27

In a Resolution28 dated December 10, 1998, the CA denied the motions for lack of merit. The
appellate court considered said motions as repetitive of their previous arguments, irrelevant
and obviously dilatory.29 As to the motion for inhibition of the Honorable Justice Reyes, the
same was denied, as the appellate court justice stressed that the decision and the resolution
were not affected by extraneous matters.30 Lastly, the appellate court granted respondent’s
motion for execution and directed the RTC to issue a new writ of execution of its decision, with
the exception of the award of attorney’s fees which the CA deleted.31

Petitioners now come before this Court in this petition for review on certiorari raising the
following issues:

I.

Whether this ejectment suit should be dismissed and whether petitioners are entitled to
damages for the unauthorized and malicious filing by Rosario (sic) Bautista of this
ejectment case, it being clear that [Roswinda] – whether as general manager or by
virtue of her subsequent designation by the Board of Directors as the corporation’s
attorney-in-fact – had no legal capacity to institute the ejectment suit, independently of
whether Director Pacana’s Order setting aside the SEC revocation Order is a mere scrap
of paper.

II.

Whether the RTC’s and the Honorable Court of Appeals’ failure and refusal to resolve
the most fundamental factual issues in the instant ejectment case render said decisions
void on their face by reason of the complete abdication by the RTC and the Honorable
Justice Ruben Reyes of their constitutional duty not only to clearly and distinctly state
the facts and the law on which a decision is based but also to resolve the decisive factual
issues in any given case.

III.
 Whether the (1) failure and refusal of Honorable Justice Ruben Reyes to inhibit himself,
despite his admission – by reason of his silence – of petitioners’ accusation that the said
Justice enjoyed a $7,000.00 scholarship grant courtesy of the uncle-in-law of respondent
"corporation’s" purported general manager and (2), worse, his act of ruling against the
petitioners and in favor of the respondent "corporation" constitute an unconstitutional
deprivation of petitioners’ property without due process of law.32

In addition to Ms. Bautista’s lack of capacity to sue, petitioners insist that respondent company
has no standing to sue as a juridical person in view of the suspension and eventual revocation
of its certificate of registration.33 They likewise question the factual findings of the court on the
bases of their ejectment from the subject premises. Specifically, they fault the appellate court
for not finding that: 1) their non-payment of rentals was justified; 2) they were deprived of
possession of all the units subject of the lease contract except Room 35; and 3) respondent
violated the terms of the contract by its continued refusal to turn over possession of Rooms 36,
37 and 38. Petitioners further prayed that a Temporary Restraining Order (TRO) be issued
enjoining the CA from enforcing its Resolution directing the issuance of a Writ of Execution.
Thus, in a Resolution34 dated January 18, 1999, this Court directed the parties to maintain the
status quo effective immediately until further orders.

The petition lacks merit.

We uphold the capacity of respondent company to institute the ejectment case. Although the
Securities and Exchange Commission (SEC) suspended and eventually revoked respondent’s
certificate of registration on February 16, 1995, records show that it instituted the action for
ejectment on December 15, 1993. Accordingly, when the case was commenced, its registration
was not yet revoked.35 Besides, as correctly held by the appellate court, the SEC later set aside
its earlier orders of suspension and revocation of respondent’s certificate, rendering the issue
moot and academic.36

We likewise affirm Ms. Bautista’s capacity to sue on behalf of the company despite lack of proof
of authority to so represent it. A corporation has no powers except those expressly conferred
on it by the Corporation Code and those that are implied from or are incidental to its existence.
In turn, a corporation exercises said powers through its board of directors and/or its duly
authorized officers and agents. Physical acts, like the signing of documents, can be performed
only by natural persons duly authorized for the purpose by corporate by-laws or by a specific
act of the board of directors.37 Thus, any person suing on behalf of the corporation should
present proof of such authority. Although Ms. Bautista initially failed to show that she had the
capacity to sign the verification and institute the ejectment case on behalf of the company,
when confronted with such question, she immediately presented the Secretary’s
Certificate38 confirming her authority to represent the company.

There is ample jurisprudence holding that subsequent and substantial compliance may call for
the relaxation of the rules of procedure in the interest of justice.39 In Novelty Phils., Inc. v. Court
of Appeals,40 the Court faulted the appellate court for dismissing a petition solely on petitioner’s
failure to timely submit proof of authority to sue on behalf of the corporation. In Pfizer, Inc. v.
Galan,41 we upheld the sufficiency of a petition verified by an employment specialist despite the
total absence of a board resolution authorizing her to act for and on behalf of the corporation.
Lastly, in China Banking Corporation v. Mondragon International Philippines, Inc, 42 we relaxed
the rules of procedure because the corporation ratified the manager’s status as an authorized
signatory. In all of the above cases, we brushed aside technicalities in the interest of justice.
This is not to say that we disregard the requirement of prior authority to act in the name of a
corporation. The relaxation of the rules applies only to highly meritorious cases, and when
there is substantial compliance. While it is true that rules of procedure are intended to promote
rather than frustrate the ends of justice, and while the swift unclogging of court dockets is a
laudable objective, we should not insist on strict adherence to the rules at the expense of
substantial justice.43 Technical and procedural rules are intended to help secure, not suppress,
the cause of justice; and a deviation from the rigid enforcement of the rules may be allowed to
attain that prime objective, for, after all, the dispensation of justice is the core reason for the
existence of courts.44

As to the denial of the motion to inhibit Justice Reyes, we find the same to be in order. First, the
motion to inhibit came after the appellate court rendered the assailed decision, that is, after
Justice Reyes had already rendered his opinion on the merits of the case. It is settled that a
motion to inhibit shall be denied if filed after a member of the court had already given an
opinion on the merits of the case, the rationale being that "a litigant cannot be permitted to
speculate on the action of the court x x x (only to) raise an objection of this sort after the
decision has been rendered."45 Second, it is settled that mere suspicion that a judge is partial to
one of the parties is not enough; there should be evidence to substantiate the suspicion. Bias
and prejudice cannot be presumed, especially when weighed against a judge’s sacred pledge
under his oath of office to administer justice without regard for any person and to do right
equally to the poor and the rich. There must be a showing of bias and prejudice stemming from
an extrajudicial source, resulting in an opinion on the merits based on something other than
what the judge learned from his participation in the case.46 We would like to reiterate, at this
point, the policy of the Court not to tolerate acts of litigants who, for just about any conceivable
reason, seek to disqualify a judge (or justice) for their own purpose, under a plea of bias,
hostility, prejudice or prejudgment.47

We now come to the more substantive issue of whether or not the petitioners may be validly
ejected from the leased premises.

Unlawful detainer cases are summary in nature. In such cases, the elements to be proved and
resolved are the fact of lease and the expiration or violation of its terms.48 Specifically, the
essential requisites of unlawful detainer are: 1) the fact of lease by virtue of a contract, express
or implied; 2) the expiration or termination of the possessor’s right to hold possession; 3)
withholding by the lessee of possession of the land or building after the expiration or
termination of the right to possess; 4) letter of demand upon lessee to pay the rental or comply
with the terms of the lease and vacate the premises; and 5) the filing of the action within one
year from the date of the last demand received by the defendant.49
It is undisputed that petitioners and respondent entered into two separate contracts of lease
involving nine (9) rooms of the San Luis Building. Records, likewise, show that respondent
repeatedly demanded that petitioners vacate the premises, but the latter refused to heed the
demand; thus, they remained in possession of the premises. The only contentious issue is
whether there was indeed a violation of the terms of the contract: on the part of petitioners,
whether they failed to pay the stipulated rent without justifiable cause; while on the part of
respondent, whether it prevented petitioners from occupying the leased premises except Room
35.

This issue involves questions of fact, the resolution of which requires the evaluation of the
evidence presented. The MeTC, the RTC and the CA all found that petitioners failed to perform
their obligation to pay the stipulated rent. It is settled doctrine that in a civil case, the
conclusions of fact of the trial court, especially when affirmed by the Court of Appeals, are final
and conclusive, and cannot be reviewed on appeal by the Supreme Court. 50 Albeit the rule
admits of exceptions, not one of them obtains in this case.51

To settle this issue once and for all, we deem it proper to assess the array of factual findings
supporting the court’s conclusion.

The evidence of petitioners’ non-payment of the stipulated rent is overwhelming. Petitioners,

however, claim that such non-payment is justified by the following: 1) the refusal of respondent
to allow petitioners to use the leased properties, except room 35; 2) respondent’s refusal to
turn over Rooms 36, 37 and 38; and 3) respondent’s refusal to accept payment tendered by
petitioners.

Petitioners’ justifications are belied by the evidence on record. As correctly held by the CA,
petitioners’ communications to respondent prior to the filing of the complaint never mentioned
their alleged inability to use the rooms.52 What they pointed out in their letters is that they did
not know to whom payment should be made, whether to Ms. Bautista or to Pacheco. 53 In their
July 26 and October 30, 1993 letters, petitioners only questioned the method of computing
their electric billings without, however, raising a complaint about their failure to use the
rooms.54 Although petitioners stated in their December 30, 1993 letter that respondent failed to
fulfill its part of the contract,55 nowhere did they specifically refer to their inability to use the
leased rooms. Besides, at that time, they were already in default on their rentals for more than
a year.

If it were true that they were allowed to use only one of the nine (9) rooms subject of the
contract of lease, and considering that the rooms were intended for a business purpose, we
cannot understand why they did not specifically assert their right. If we believe petitioners’
contention that they had been prevented from using the rooms for more than a year before the
complaint for ejectment was filed, they should have demanded specific performance from the
lessor and commenced an action in court. With the execution of the contract, petitioners were
already in a position to exercise their right to the use and enjoyment of the property according
to the terms of the lease contract.56 As borne out by the records, the fact is that respondent
turned over to petitioners the keys to the leased premises and petitioners, in fact, renovated
the rooms. Thus, they were placed in possession of the premises and they had the right to the
use and enjoyment of the same. They, likewise, had the right to resist any act of intrusion into
their peaceful possession of the property, even as against the lessor itself. Yet, they did not lift a
finger to protect their right if, indeed, there was a violation of the contract by the lessor.

What was, instead, clearly established by the evidence was petitioners’ non-payment of rentals
because ostensibly they did not know to whom payment should be made. However, this did not
justify their failure to pay, because if such were the case, they were not without any remedy.
They should have availed of the provisions of the Civil Code of the Philippines on the
consignation of payment and of the Rules of Court on interpleader.

Article 1256 of the Civil Code provides:

Article 1256. If the creditor to whom tender of payment has been made refuses without just
cause to accept it, the debtor shall be released from responsibility by the consignation of the
thing or sum due.

Consignation alone shall produce the same effect in the following cases:

xxxx

(4) When two or more persons claim the same right to collect;

x x x x.

Consignation shall be made by depositing the things due at the disposal of a judicial authority,
before whom the tender of payment shall be proved in a proper case, and the announcement
of the consignation in other cases.57

In the instant case, consignation alone would have produced the effect of payment of the
rentals. The rationale for consignation is to avoid the performance of an obligation becoming
more onerous to the debtor by reason of causes not imputable to him.58 Petitioners claim that
they made a written tender of payment and actually prepared vouchers for their monthly
rentals. But that was insufficient to constitute a valid tender of payment. Even assuming that it
was valid tender, still, it would not constitute payment for want of consignation of the amount.
Well-settled is the rule that tender of payment must be accompanied by consignation in order
that the effects of payment may be produced.59

Moreover, Section 1, Rule 62 of the Rules of Court provides:

Section 1. When interpleader proper. – Whenever conflicting claims upon the same subject
matter are or may be made against a person who claims no interest whatever in the subject
matter, or an interest which in whole or in part is not disputed by the claimants, he may bring
an action against the conflicting claimants to compel them to interplead and litigate their
several claims among themselves.

Otherwise stated, an action for interpleader is proper when the lessee does not know to whom
payment of rentals should be made due to conflicting claims on the property (or on the right to
collect).60 The remedy is afforded not to protect a person against double liability but to protect
him against double vexation in respect of one liability.61

Notably, instead of availing of the above remedies, petitioners opted to refrain from making
payments.

Neither can petitioners validly invoke the non-delivery of Rooms 36, 37 and 38 as a justification
for non-payment of rentals. Although the two contracts embraced the lease of nine (9) rooms,
the terms of the contracts - with their particular reference to specific rooms and the monthly
rental for each - easily raise the inference that the parties intended the lease of each room
separate from that of the others.lavvphil There is nothing in the contract which would lead to
the conclusion that the lease of one or more rooms was to be made dependent upon the lease
of all the nine (9) rooms. Accordingly, the use of each room by the lessee gave rise to the
corresponding obligation to pay the monthly rental for the same. Notably, respondent
demanded payment of rentals only for the rooms actually delivered to, and used by,
petitioners.

It may also be mentioned that the contract specifically provides that the lease of Rooms 36, 37
and 38 was to take effect only when the tenants thereof would vacate the premises. Absent a
clear showing that the previous tenants had vacated the premises, respondent had no
obligation to deliver possession of the subject rooms to petitioners. Thus, petitioners cannot
use the non-delivery of Rooms 36, 37 and 38 as an excuse for their failure to pay the rentals
due on the other rooms they occupied.1avvphil

In light of the foregoing disquisition, respondent has every right to exercise his right to eject the
erring lessees. The parties’ contracts of lease contain identical provisions, to wit:

In case of default by the LESSEE in the payment of rental on the fifth (5th) day of each month,
the amount owing shall as penalty bear interest at the rate of FOUR percent (4%) per month, to
be paid, without prejudice to the right of the LESSOR to terminate his contract, enter the
premises, and/or eject the LESSEE as hereinafter set forth;62

Moreover, Article 167363 of the Civil Code gives the lessor the right to judicially eject the lessees
in case of non-payment of the monthly rentals. A contract of lease is a consensual, bilateral,
onerous and commutative contract by which the owner temporarily grants the use of his
property to another, who undertakes to pay the rent therefor. 64 For failure to pay the rent,
petitioners have no right to remain in the leased premises.
WHEREFORE, premises considered, the petition is DENIED and the Status Quo Order dated
January 18, 1999 is hereby LIFTED. The Decision of the Court of Appeals dated May 26, 1998
and its Resolution dated December 10, 1998 in CA-G.R. SP No. 37739 are AFFIRMED.

SO ORDERED.

G.R. No. 155432 June 9, 2005

CRISPINA UNIDA, married to ANTONIO MABALOT, NANCY UNIDA, married to EUGENIO

UNIDA, EDWIN DAMO, ANDREW MABALOT, RICARDO DAMO and JOCELYN
DAMO, Petitioners,
vs.
HEIRS OF AMBROSIO URBAN, represented by LUCIO CABADDU, Respondent.

DECISION

CARPIO MORALES, J.:

The present petition for review on certiorari originated from a complaint for unlawful detainer filed by
respondent, "Heirs of Ambrocio Urban represented by Lucio Cabaddu," against the defendants-
herein petitioners Crispina Unida et al. at the Municipal Trial Court (MTC) of Camalaniugan,
Cagayan.

Since the main issue raised is one of jurisdiction over the subject matter, a recital of the pertinent
allegations of the complaint is in order.

In its March 3, 1998 Complaint, the plaintiff-herein respondent who claims to be the owner of the
property, which had been subdivided into Lots 298, 299, and 616, subject of the case alleged that:

xxx

7. About ten (10) years ago, more or less, without the knowledge or consent of the owners, the
defendants[-herein petitioners], without any legal right whatsoever, entered the premises of the land
which is the subject of this suit and cultivated the same as their own, not giving any share to the
owners;

8. Because the location of the land was then infested by the New People’s Army at the time of the
instrusion of the defendants, the owners did nothing but to tolerate their (defendants) stay and
cultivation over the land in question;

x x x1 (Underscoring supplied)
In their Answer, the defendants-herein petitioners denied, among other things, having any
knowledge or information sufficient to form a belief regarding the authority of Lucio Cabaddu to
represent the plaintiff and concluded that "he has no right and/or personality to represent the alleged
[H]eirs"-plaintiff. On the merits, petitioners asserted that petitioner Crispina Unida has possessed
Lots 298 and 616, and that petitioner Nancy Unida has possessed Lot 299, both in the concept of
owner, personally and through their predecessors-in-interest, since time immemorial, and that the
title to the property subject of the complaint, OCT No. P-48306, was fraudulently obtained by
respondents.2

By Decision3 of June 7, 1999, the MTC, resolving in the affirmative the issues of 1) whether the
plaintiff "impliedly tolerated the defendants’ act of cultivating the land," and 2) whether the plaintiff is
the "lawful owner of the land," accordingly rendered judgment against the defendants-herein
petitioners.

On appeal to the Regional Trial Court (RTC), the defendants-herein petitioners raised the following
assignment of errors:

1. THE LOWER COURT ERRED IN NOT DISMISSING THE CASE FOR THERE IS
ABSOLUTELY NO EVIDENCE ON RECORD SHOWING THE AUTHORITY OF ALLEGED
PLAINTIFF LUCIO CABADDU TO INSTITUTE THE PRESENT SUIT;

2. THE LOWER COURT ERRED IN ORDERING THE EJECTMENT OF THE

DEFENDANTS ALTHOUGH THEY ARE IN ACTUAL, OPEN, PUBLIC AND NOTORIOUS
POSSESSION OF THE LOTS IN DISPUTE UNDER BONAFIDE CLAIM OF OWNERSHIP
EVEN BEFORE THE SECOND WORLD WAR HAVING INHERITED SAID LAND FROM
THEIR FATHER LUIS UNIDA.4 (Underscoring supplied)

By Decision5 dated October 26, 1999, Branch 10 of the RTC of Cagayan reversed the MTC decision,
it holding that although Lucio Cabaddu was given a Special Power of Attorney (SPA) subsequent to
the filing of the complaint, the SPA did not contain a specific authorization for him to institute the
complaint.

In any event, the RTC held that the complaint was dismissible for while in its title Lucio Cabaddu
appeared as the representative of the plaintiff-Heirs of Ambrocio Urban, paragraph 1 of the
complaint alleged as follows:

1. Plaintiff[,] of legal age, married to Leticia Urban and a resident of Dugo, Camalaniugan, Cagayan,
is the Authorized representative of the heirs of Ambrocio Urban,6

thus clearly showing that he "instituted it as plaintiff in behalf of the heirs," hence, "not allowed" as he
is not the real party in interest.

On the substantive issue, the RTC held that since the complaint itself asserted that petitioners’ entry
into the property was unlawful from the very beginning, respondents’ alleged "toleration" thereof
cannot be considered as toleration in contemplation of law in unlawful detainer cases, hence, the
action for unlawful detainer was improper. Neither was forcible entry the proper remedy, added the
RTC, as the entry of petitioners was not by "means of force, violence, threats, intimidation, stealth or
strategy." The RTC suggested though that the remedy of the plaintiff-herein respondent was to file
an accion publiciana or reivindicatoria before the proper RTC.

On appeal of respondent to the CA, it assigned two errors of the RTC, to wit:
 I. THE APPELLATE COURT ERRED IN FINDING THAT PETITIONERS’
REPRESENTATIVE LUCIO CABADDU LACKS THE PERSONALITY TO SUE DESPITE HIS
CONSTITUTION AS AN ATTORNEY-IN-FACT BY PETITIONERS THROUGH A VALIDLY
EXECUTED SPECIAL POWER OF ATTORNEY.

II. THE APPELLATE COURT ERRED IN REVERSING THE DECISION OF THE

MUNICIPAL TRIAL COURT AND DISMISSING THE COMPLAINT ON THE GROUND THAT
THE MODE OF ACTION (UNLAWFUL DETAINER) TAKEN BY THE PETITIONER IS
INAPPROPRIATE DESPITE THE ALLEGATIONS IN THE COMPLAINT THAT
RESPONDENTS POSSESSION OVER THE LAND IN DISPUTE WAS ONLY UPON THE
MERE TOLERANCE OF THE PETITIONERS.7 (Underscoring supplied)

By Decision promulgated on September 19, 2001,8 the Court of Appeals reversed the decision of the
RTC and reinstated that of the MTC.

In reversing the RTC decision, the appellate court held that the subsequent execution of an SPA in
favor of Lucio Cabaddu cured the defect in the filing of the complaint. And the appellate court
"agree[d] with the Municipal Trial Court that [the plaintiff-herein respondent] had established [its] right
of possession as owners of the [property]." Furthermore, the appellate court held that "an allegation
that the defendant is unlawfully withholding possession from the plaintiff is deemed sufficient for one
alleging that the withholding of possession or the refusal to vacate is unlawful, without necessarily
employing the terminology of the law."

Hence, the present Petition for Review with the following assignments of errors:

a) The Honorable Court of Appeals seriously erred in ruling that the subsequent Special
Power of Attorney cures the defect in the Complaint because such conclusion was grounded
entirely on speculation, the inference made is manifestly mistaken, and the judgment was
based on misapprehension of facts.9

b) The Honorable Court of Appeals erred in not finding that the trial court has no jurisdiction
over the unlawful detainer case because the defendants Crispina Unida and husband
Antonio Mabalot and Eugenio Unida married to Nancy Unida are the owners of the land in
dispute having possessed the same since pre-war time and inherited said land from their
father Luis Unida who owns seventy two (72) hectares before the Second World
War.10 (Underscoring supplied)

As stated early on, the main issue, that reflected in herein petitioners’ second assigned error, is one
of jurisdiction over the complaint of herein respondent.

From the earlier quoted material paragraphs-allegations of the complaint, petitioners’ entry into the
property was, by respondent’s own information, unlawful from the very beginning. Respondent,
nonetheless, claimed that it merely tolerated petitioners’ presence in the property. Clearly, an
unlawful detainer action does not lie.

For to justify an action for unlawful detainer,

the permission or tolerance must have been present at the beginning of the possession.
Otherwise, if the possession was unlawful from the start, an action for unlawful detainer would be
an improper remedy. Sarona v. Villegas elucidates thus:
"A close assessment of the law and the concept of the word 'tolerance' confirms our view heretofore
expressed that such tolerance must be present right from the start of possession sought to be
recovered, to categorize a cause of action as one of unlawful detainer not of forcible
entry…"11 (Emphasis and underscoring supplied)

As correctly held then by the RTC, the case cannot be considered as an unlawful detainer case, the
"tolerance" claimed by respondents not being that contemplated by law in unlawful detainer cases;
neither can the case be considered as one for forcible entry because the entry of petitioners was not
alleged to have been by means of force, intimidation, threats, stealth or strategy.

Since the complaint did not satisfy the jurisdictional requirement of a valid cause for unlawful
detainer or forcible entry, the MTC had no jurisdiction over the case.12 It is in this light that this Court
finds that the RTC correctly found that the MTC had no jurisdiction over the complaint.
Parenthetically, it was error for the RTC to find the complaint dismissible also on the ground that
Lucio Cabaddu was not the real party in interest. That paragraph 1 of the complaint alleged that
"plaintiff [is] of legal age, married to Leticia Urban . . . is the Authorized representative of the heirs of
Ambrocio Urban" did not modify the name of the plaintiff appearing in the title of the complaint. In
other words, that the plaintiff appearing in the title was worded as "Heirs of Ambrocio Urban
represented by Lucio Cabaddu" complied with Section 3 of Rule 3 of the Rules of Court which reads:

SEC. 3. Representative as parties. – Where the action is allowed to be prosecuted or defended by a

representative or someone acting in a fiduciary capacity, the beneficiary shall be included in the title
of the case and shall be deemed to be the real party in interest. A representative may be a trustee of
an express trust, a guardian, an executor or administrator, or a party authorized by law or these
Rules. An agent acting in his own name and for the benefit of an undisclosed principal may sue or
be sued without joining the principal except when the contract involves things belonging to the
principal. (Underscoring supplied)

The foregoing discussion renders it unnecessary to still rule on the first issue of whether the Special
Power of Attorney presented by Lucio Cabaddu, the representative of respondent, may be validly
considered, it not having been formally offered in evidence before the MTC. Suffice it to state that,
as a rule, documents presented as proof of a fact in issue must be offered in evidence before a trial
court.13

A final note. Since the RTC found that the MTC had no jurisdiction over the case, it should have
followed the mandate of Sec. 8, Rule 40, which provides:

Sec. 8. Appeal from orders dismissing case without trial; lack of jurisdiction. – If an appeal is taken
from an order of the lower court dismissing the case without a trial on the merits, the Regional Trial
Court may affirm or reverse it, as the case may be. In case of affirmance and the ground of dismissal
is lack of jurisdiction over the subject matter, the Regional Trial Court, if it has jurisdiction thereover,
shall try the case on the merits as if the case was originally filed with it. In case of reversal, the case
shall be remanded for further proceedings.

If the case was tried on the merits by the lower court without jurisdiction over the subject
matter, the Regional Trial Court on appeal shall not dismiss the case if it has original
jurisdiction thereof, but shall decide the case in accordance with the preceding section,
without prejudice to the admission of amended pleadings and additional evidence in the
interest of justice. (Emphasis and underscoring supplied)

WHEREFORE, the petition is GRANTED. The assailed decision of the Court of Appeals is
REVERSED and SET ASIDE.
Let the records of the case be remanded to Branch 10 of the Regional Trial Court of Cagayan which
is hereby directed to take action on it in accordance with the above-quoted provision of Sec. 8 of
Rule 40 of the Rules of Court.

SO ORDERED.

G.R. No. 151168 : August 25, 2010]

CEBU AUTOMETIC MOTORS, INC. AND TIRSO UYTENGSU III, PETITIONERS, VS.
GENERAL MILLING CORPORATION, RESPONDENT.

DECISION

BRION, J.:

We resolve the petition filed by Cebu Autometic Motors, Inc. (CAMI) to assail the
decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 64363. The CA decision:

a) reversed and set aside the decision of the Regional Trial Court of Cebu, Branch 16
(RTC) in Civil Case No. CEB-25804 dismissing respondent General Milling Corporation's
(GMC) unlawful detainer complaint against CAMI;[2] and

b) reinstated the decision of the Municipal Trial Court in Cities (MTCC) in Civil Case no.
R-41923[3] ordering: CAMI to vacate the subject property; and CAMI and Tirso
Uytengsu III (Uytengsu) to pay GMC actual damages in the amount of P20,000.00 a
month from the date of demand until property has been vacated, as well as P50,000.00
for attorney's fees.

FACTUAL ANTECEDENTS

GMC, a domestic corporation, is the registered owner of the GMC Plaza Complex, a
commercial building on Legaspi Extension corner McArthur Boulevard, Cebu City. On
February 2, 1998, GMC, represented by its General Manager, Luis Calalang Jr.
(Calalang), entered into a contract with CAMI, a domestic corporation, for the lease of a
2,906 square meter commercial space within GMC's building (leased premises).

The lease contract was for a period of twenty (20) years, with the monthly rental fixed
at P10,000.00. The contract further stipulated that the property shall be used
exclusively by CAMI as a garage and repair shop for vehicles, [4] and imposed upon CAMI
the following terms and conditions:

C. The LESSEE shall upon the signing of this contract immediately deposit with the
LESSOR the following amounts:
 a. The sum of PESOS: - TEN THOUSAND & 00/100 (P10,000.00)
inclusive of VAT Philippine currency, to be applied as rental for the
last month;

b. The sum PESOS - TEN THOUSAND & 00/100 - (P10,000.00) as

guarantee deposit to defray the cost of the repairs necessary to
keep the leased premises in a good state of repair and to pay the
LESSEE'S unpaid bills from the various utility services in the leased
premises; that this amount shall be refundable, if upon the
termination of this contract, the leased premises are in good state
of repair and the various utility bills have been paid.

x x x x

H. The LESSEE shall not place or install any signboard, billboard, neon lights, or other
form of advertising signs on the leased premises or on any part thereof, except upon
the prior written consent of the LESSOR.

x x x x

M. Finally, the failure on the part of the LESSOR to insist upon a strict performance of
any of the terms, conditions and covenants hereof shall not be deemed a
relinquishment or waiver of any right or remedy that said LESSOR may have, nor shall
it be construed as a waiver of any subsequent breach or default of the terms, conditions
and covenants herein contained, unless expressed in writing and signed by the LESSOR
or its duly authorized representative.[5]

According to GMC, CAMI violated the provisions of the lease contract when: a) CAMI
subleased a portion of the leased premises without securing GMC's prior written
consent; b) CAMI introduced improvements to the leased premises without securing
GMC's consent; and c) CAMI did not deliver the required advance rental and deposit to
GMC upon the execution of the lease contract.

On June 11, 1999, GMC sent CAMI a letter informing the latter that it was terminating
the lease contract and demanding that CAMI vacate the premises and settle all its
unpaid accounts before the end of that month.

On July 7, 1999, GMC filed a complaint for unlawful detainer with the MTCC against
CAMI, asserting that it terminated the lease contract on June 11, 1999 because CAMI
violated the terms of the contract and continued to do so despite GMC's repeated
demands and reminders for compliance; and that CAMI refused to vacate the leased
premises. GMC also impleaded Uytengsu, the General Manager of CAMI, in his official
and personal capacities.

In response, CAMI denied that it had subleased any portion of the leased premises. On
the improvements allegedly introduced without GMC's consent, CAMI explained that
these were introduced prior to the execution of the present lease contract; in fact,
these improvements were made with GMC's knowledge and were the reason why GMC
decided to enter into the present lease contract with CAMI for 20 years at the low rental
of only P10,000.00 a month. On its alleged failure to deliver the advance rental and
deposit, CAMI pointed out that Calalang, GMC's representative, had verbally waived this
requirement. Moreover, CAMI contended that a party is considered in default only if it
fails to comply with the demand to observe the terms and conditions of the contract.
Since CAMI immediately deposited the amount of P20,000.00 with the court as advance
rental and deposit after it learned of the unlawful detainer complaint, it could not be
considered in default. Consequently, CAMI posits that it did not violate any of the
provisions of the lease contract, and GMC had no right to terminate the lease contract
and to demand CAMI's ejectment from the leased premises.

On July 5, 2000, the MTCC rendered its decision in favor of GMC. The dispositive
portion of its ruling reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff [GMC] and against
the defendant [CAMI], to wit:

1. Ordering the defendants and all other person (sic) staying in the premises of the
plaintiff to vacate the property and remove all their temporary structure therein;

2. Ordering the defendants to pay plaintiff compensatory damages in the amount of

P20,000.00 a month from date (sic) demand until defendants vacate plaintiff property;

3. Ordering the defendants to pay plaintiff Attorney's Fees in the amount of

P50,000.00;

4. Ordering the defendants to pay the costs.

SO ORDERED.

The RTC reversed the MTCC decision and dismissed GMC's complaint after finding that
CAMI had not violated the terms and conditions of the lease contract. The RTC learned
that Calalang had waived payment of the advance rental and deposit, and had given his
consent to the introduction of improvements, signboards and alterations on the leased
premises. The RTC also held that CAMI did not sublease the premises.

GMC sought relief from the RTC decision through a petition for review with the CA. GMC
claimed that Calalang's waiver of the advance rental and deposit was void since it was
not in writing. In response, CAMI questioned whether GMC had complied with the
requisites of Section 2, Rule 70 of the Rules of Court prior to the filing of the unlawful
detainer complaint - an issue that, according to GMC, was raised for the first time
before the CA.

In the assailed September 28, 2001 decision, the CA reversed the RTC decision and
held that even though the advance rental and deposit payments could be waived under
the contract, the waiver had to be in writing and signed by a duly authorized
representative of GMC in order to be effective. Since Calalang's waiver was not
contained in a written document, it could not bind GMC.

As to the contention that GMC failed to comply with the jurisdictional requirement found
in Section 2, Rule 70 of the Rules of Court, the CA held that such a belated claim could
no longer be entertained at that late stage of the proceedings. Since CAMI freely
litigated on the issues presented by GMC before the lower courts without raising this
issue, it cannot now raise the issue on the basis of estoppel.

THE PETITION

CAMI now comes to this Court via a petition for review on certiorari,[6] claiming that the
CA committed reversible error in its September 28, 2001 decision and November 22,
2001 resolution.

First, CAMI contends that the demand letter sent by GMC merely stated that it expected
CAMI to vacate the premises and pay all its unsettled accounts by the end of June
1999; the letter did not demand compliance with the terms of the contract. Thus, CAMI
could not be considered in default and GMC had no cause to terminate the lease
contract. The defective demand letter also failed to comply with the demand required
by Section 2, Rule 70 of the Rules of Court; pursuant to Arquelada v. Philippine
Veterans Bank[7] - which held that the demand from the lessor to pay or to comply with
the conditions of the lease and to vacate the premises must be alleged in the complaint
for unlawful detainer for the MTCC to acquire jurisdiction over the case - the MTCC thus
failed to acquire jurisdiction over GMC's complaint against it.

Next, CAMI assails the CA interpretation of paragraph M of the lease contract.

[8]
According to CAMI, paragraph M only applies when the waiver refers to the right of
GMC to take action for any violation of the terms and conditions of the contract. Where
the waiver relates to the performance of the term or condition, such as waiver of the
payment of advance rental and deposit, the waiver does not need to be in writing.

Last, CAMI questions the reinstatement of the MTCC decision, which ordered CAMI and
Uytengsu to pay for actual damages to GMC in the amount of P20,000.00 per month
from the time of demand until CAMI actually vacated the property, and attorney's fees
in the amount of P50,000. CAMI assails the award of damages for having no legal or
factual basis.

GMC, on the other hand, contends that CAMI never raised the issue of GMC's lack of
demand before either the MTCC or the RTC as one of its defenses; instead, this issue,
as well as the corresponding issue of the MTCC's lack of jurisdiction, was raised for the
first time on appeal before the CA. GMC also reiterates the CA's ruling that any waiver
of the lease contract's terms and conditions must be in writing in order to be effective.
Finally, GMC dismisses CAMI's questions on the inclusion of Uytengsu, as well as the
award of actual damages and attorney's fees, for not having been raised before the
lower courts.

THE COURT'S RULING

We resolve to grant the petition.

Petition raises factual questions

In petitions for review on certiorari under Rule 45 of the Rules of Civil Procedure, only
questions of law may be raised and passed upon by this Court. As in any general rule,
however, certain exceptions may exist.[9] In the present case, we are asked to either
uphold GMC's unlawful detainer complaint or dismiss it outright under a situation where
the findings of facts of the trial court and the appellate court conflict with each other,
which is one of the recognized exceptions to the requirement that Rule 45 petitions deal
only with questions of law. If necessary, therefore, we can examine the evidence on
record in this case and determine the truth or falsity of the parties' submissions and
allegations.

On the issue of demand

GMC claims that CAMI belatedly raised the issue of lack of demand. On the other hand,
CAMI contends in its Motion to Admit Reply[10] that it raised this defense as early as
its Answer before the MTCC.

We agree with CAMI. The MTCC decision, which quoted CAMI's Answer extensively,
clearly shows that CAMI stated that it will be in default with respect to the advance
rental and deposit only after GMC has made a demand for the payment. CAMI also
stated that it had already deposited the advance rental and deposit with the Clerk of
Court of the MTCC. Lastly, CAMI denied GMC's claim in its complaint that a demand had
been made.[11] These statements, taken together, clearly belie GMC's claim that CAMI
never raised the lack of demand as an issue before the lower court.

Another issue raised, relating to demand, is whether GMC sent CAMI the required
demand letter. Invoking Article 1169 of the Civil Code, [12] CAMI principally contends that
it could not be considered in default because GMC never sent a proper demand letter.

CAMI, in invoking Article 1169, apparently overlooked that what is involved is not a
mere mora or delay in the performance of a generic obligation to give or to do that
would eventually lead to the remedy of rescission or specific performance. What is
involved in the case is a contract of lease and the twin remedies of rescission and
judicial ejectment after either the failure to pay rent or to comply with the conditions of
the lease. This situation calls for the application, not of Article 1169 of the Civil Code
but, of Article 1673 in relation to Section 2, Rule 70 of the Rules of Court. Article 1673
states:

Article 1673. The lessor may judicially eject the lessee for any of the following
causes:

x x x x

(3) Violation of any of the conditions agreed upon in the contract; xxx

Based on this provision, a lessor may judicially eject (and thereby likewise rescind the
contract of lease) the lessee if the latter violates any of the conditions agreed upon in
the lease contract. Implemented in accordance with Section 2, Rule 70, the lessor is
not required to first bring an action for rescission, but may ask the court to do so and
simultaneously seek the ejecment of the lessee in a single action for unlawful detainer.
[13]
Section 2, Rule 70 of the Rules of Court provides:

Sec. 2. Lessor to proceed against lessee only after demand.

Unless otherwise stipulated, such action by the lessor shall be commenced
only after demand to pay or comply with the conditions of the lease and to
vacate is made upon the lessee, or by serving written notice of such demand upon
the person found on the premises, or by posting such notice on the premises if no
person be found thereon, and the lessee fails to comply therewith after fifteen (15)
days in the case of land or five (5) days in the case of buildings. [Emphasis supplied.]

GMC insists that it complied with the required demand when it sent CAMI the following
letter:

June 11, 1999

CEBU AUTOMETIC MOTORS, INC.

GMC Plaza Complex
Legaspi Extension cor.
MacArthur Boulevard
Cebu City

ATTENTION: MR. TIRSO UYTENGSU III

Gentlemen:

We are informing you of the termination of the Contract of Lease over our clients,
General Milling Corporation premises at GMC Plaza Complex effective June 30, 1999.

Your repeated violations of the terms of the contract, failure to deposit the required
amounts (equivalent to two to three months rent) the subleasing of a portion of the
leased premises without the required prior written consent, the introduction of
improvements and alterations and the installation of a signboard without the prior
written consent, leave us no choice.

It should be mentioned that the latest Contract of Lease was questionably entered by
you and Mr. Luis Calalang, Jr. hurriedly, knowing fully well that the same was
completely one-sided in your favor and totally disadvantageous to GMC. It was as if
there was a plot or scheme to take advantage of the situation at the time.

We expect you to vacate the premises, settle all your unpaid accounts on or
before the end of June, 1999. [Emphasis supplied.]

With this demand letter as evidence, we hold it undisputed that GMC did serve a prior
demand on CAMI. The question, however, is whether this is the demand that Section
2, Rule 70 of the Rules of Court contemplates as a jurisdictional requirement before a
lessor can undertake a judicial ejectment pursuant to Article 1673 of the Civil Code.

Section 2, Rule 70, on its face, involves two demands that may be made in the same
demand letter, namely, (1) the demand for payment of the amounts due the
lessor, or the compliance with the conditions of the lease, and (2) the demand to
vacate the premises. These demands, of course, are not intended to be complied with
at the same time; otherwise, the provision becomes contradictory as it is pointless to
demand payment or compliance if the demand to vacate is already absolute and must
be heeded at the same time as the demand to pay or to comply. It is only after the
demands for payment or compliance are made on the lessee and subsequently rejected
or ignored that the basis for the unlawful detainer action arises.

The twin aspects of the demand letter can best be understood when Section 2, Rule 70
is read and understood as the specific implementing procedural rule to carry out the
results that Article 1673 mandates - the rescission of the contract of lease and the
judicial ejectment of the lessee. The judicial rescission of a contract of lease is
essentially governed by Article 1659 of the Civil Code, grounded on the breach of the
parties' statutory obligations: in the case of the lessee, for its failure to pay the rent or
to use the property under lease for the purpose it was intended. Article 1673, read
with Section 2, Rule 70 of the Rules, does away with the need for an
independent judicial action to rescind prior to ejectment by combining these
remedies in an unlawful detainer action.

The law of contracts (essentially, Articles 1191 of the Civil Code for judicial rescission
and Article 1659 for the judicial rescission of lease agreements) firmly establishes that
the failure to pay or to comply with the contractual term does not, by itself, give rise to
a cause of action for rescission; the cause of action only accrues after the lessee
has been in default for its failure to heed the demand to pay or to comply.
[14]
With the contract judicially rescinded, the demand to vacate finds full legal basis.

Article 1673, implemented pursuant to Section 2, Rule 70, does away with a separate
judicial action for rescission, and allows under a single complaint the judicial ejectment
of the lessee after extrajudicial rescission has taken place. These combined remedies
account for the separate aspects of the demand letter: the demand to pay rentals or to
comply with the terms of the lease, and to vacate. The tenant's refusal to heed the
demand to vacate, coming after the demand to pay or to comply similarly went
unheeded, renders unlawful the continued possession of the leased premises; hence,
the unlawful detainer action.[15]

In Dio v. Concepcion, we ruled that:

Under Article 1673 of the Civil Code, the lessor may judicially eject the lessee for,
among other causes: (1) lack of payment of the price stipulated; or (2) violation of any
of the conditions agreed upon in the contract. Previous to the institution of such
action, the lessor must make a demand upon the lessee to pay or comply with
the conditions of the lease and to vacate the premises. It is the owner's
demand for the tenant to vacate the premises and the tenant's refusal to do so
which makes unlawful the withholding of possession. [16] Such refusal violates the
owner's right of possession giving rise to an action for unlawful detainer. [Emphasis
supplied.]

Mr. Justice Jose Vitug further explained the Court's action in this case in his Separate
Opinion when he said:

I just would like to add, by way of clarification, that the principal remedies open to an
obligee, upon the breach of an obligation, are generally judicial in nature and must be
independently sought in litigation, i.e., an action for performance (specific, substitute or
equivalent) or rescission (resolution) of a reciprocal obligation. The right to rescind
(resolve) is recognized in reciprocal obligations; it is implicit, however, in third
paragraph of Article 1191 of the Civil Code that the rescission there contemplated can
only be invoked judicially. Hence, the mere failure of a party to comply with what is
incumbent upon him does not ipso jure produce the rescission (resolution) of the
obligation.

Exceptionally, under the law and, to a limited degree, by agreement of the parties,
extrajudicial remedies may become available such as, in the latter case, an option to
rescind or terminate a contract upon the violation of a resolutory facultative
condition. In the case of lease agreements, despite the absence of an explicit
stipulation, that option has been reserved by law in favor of a lessee under Article 1673
of the Civil Code by providing that the lessor may judicially eject the lessee for, among
other grounds, a violation of any of the conditions agreed upon in the contract. The
provision, read in conjunction with Section 2, Rule 70, of the 1997 Rules of Civil
Procedure, would, absent a contrary stipulation, merely require a written demand on
the lessee to pay or to comply with the conditions of the lease and to vacate the
premises prior to the institution of an action for ejectment. The above provisions, in
effect, authorizes the lessor to terminate extrajudicially the lease (with the same effect
as rescission) by simply serving due notice to the lessee.

In this particular instance, therefore, the only relevant court jurisdiction involved is that
of the first level court in the action for ejectment, an independent judicial action for
rescission being unnecessary.

Thus, as further clarified, an extrajudicial rescission gave rise to the demand to vacate
that, upon being refused, rendered the possession illegal and laid the lessee open to
ejectment. The rescission, an extrajudicial one, was triggered by the lessee's refusal to
pay the rent or to comply with the terms of the lease. The Court put it in plainer terms
in Arquelada v. Philippine Veterans Bank:[17] where it said:

As contemplated in Section 2, the demand required is the demand to pay or comply

with the conditions of the lease and not merely a demand to vacate.
Consequently, both demands - either to pay rent or adhere to the terms of the
lease and vacate are necessary to make the lessee a deforciant in order that
an ejectment suit may be filed. It is the lessor's demand for the lessee to vacate the
premises and the tenant's refusal to do so which makes unlawful the withholding of the
possession. Such refusal violates the lessor's right of possession giving rise to an action
for unlawful detainer. However, prior to the institution of such action, a demand
from the lessor to pay or comply with the conditions of the lease and to vacate
the premises is required under the aforequoted rule. Thus, mere failure to pay
the rents due or violation of the terms of the lease does not automatically
render a person's possession unlawful. Furthermore, the giving of such demands
must be alleged in the complaint, otherwise the MTC cannot acquire jurisdiction over
the case. [Emphasis supplied.]

A close examination of GMC's letter to CAMI tells us that the letter merely informed
recipient CAMI that GMC had terminated the lease based on the cited violations of the
terms of the lease, and on the basis of this termination, required CAMI to vacate the
premises by the end of the month. In other words, the letter did not demand
compliance with the terms of the lease; GMC was past this point as it had rescinded the
contract of lease and was already demanding that the leased premises be vacated and
the amounts owing be paid. Thus, whether or not the amounts due were paid, the lease
remained terminated because of the cited violations.

From this perspective, GMC did not fully comply with the requirements of Section 2,
Rule 70. Technically, no extrajudicial rescission effectively took place as a result
of the cited violations until the demand to pay or comply was duly served and was
rejected or disregarded by the lessee. This aspect of the demand letter - missing in the
demand letter and whose rejection would have triggered the demand to vacate - gave
GMC no effective cause of action to judicially demand the lessee's ejectment. All these,
the appellate court unfortunately failed to appreciate.

Our above conclusion renders unnecessary any further ruling on the merits of the
parties' positions on the existence of the substantive grounds for rescission and
ejectment.

WHEREFORE, premises considered, we GRANT the petition and REVERSE and SET
ASIDE the decision of the Court of Appeals dated September 28, 2001 in CA-G.R. SP.
No. 64363. We accordingly DECLARE General Milling Corporation's complaint for
unlawful detainer, Civil Case No. R-41923 before the Municipal Trial Court in Cities of
Cebu City, DISMISSED for lack of cause of action. Costs against the respondent
General Milling Corporation.

SO ORDERED.